Housing market sees unexpected 2% spike in July sales

The number of homes sold in the U.S. didn’t dip like analysts said it would. July home sales clocked a 2% increase from June, bringing the total to 4.01 million units on a seasonally adjusted annual rate, according to data released by the National Association of Realtors on Thursday.

These sales reflect deals that were likely agreed to in May and June, when mortgage rates were in a temporary slide. During that period, the 30-year fixed mortgage rate briefly crossed 7% in May, then ended June at 6.67%, based on data from Mortgage News Daily.

That dip in borrowing costs likely helped lock in buyers who had been sitting on the sidelines.

Inventory climbs, but affordable homes remain out of reach

The number of homes available for sale surged to 1.55 million by the end of July, marking a 15.7% increase compared to the same time last year. That puts current inventory at its highest level since May 2020, though it’s still well below what was seen before the Covid years.

At the current pace of sales, this stock represents a 4.6-month supply, which remains short of the six-month benchmark considered healthy for a balanced market.

More homes on the market didn’t lead to cheaper deals for buyers. The median price of homes sold in July was $422,400, up 0.2% from the same month last year and the highest July price on record. That said, the pace of price growth is slowing.

Lawrence Yun, chief economist at NAR, pointed out that “the ever-so-slight improvement in housing affordability is inching up home sales.” He also noted that wage growth is now outpacing home price growth, which gives buyers some breathing room, although not much.

Yun also said condo sales increased in the South, where prices have been falling over the past year. But that regional drop isn’t helping most buyers nationally. Sales remain strongest at the high end of the market.

Homes priced above $1 million saw a 7.1% year-over-year increase in sales. On the other hand, deals for homes between $100,000 and $250,000 dipped by 0.1%, and homes below $100,000 dropped sharply by 8%.

Investors return while first-time buyers back away

Homes aren’t flying off the shelves like they used to. In July, it took an average of 28 days to sell a property, up from 24 days a year ago.

Meanwhile, first-time buyers made up just 28% of sales, down from 30% in June and 29% in July 2024. That drop is yet another sign that rising borrowing costs are pushing out entry-level buyers.

Investors, however, are stepping in. They accounted for 20% of all sales in July, compared to 13% during the same period last year. This increase might be linked to the growing supply of listings, which can create opportunities for cash-rich buyers looking for deals.

Yun called attention to the 31% share of cash transactions, up from 27% last year, calling the level “unusually high” and noting that stock market gains or existing housing wealth could be behind the shift.

Even with more listings, most Americans still can’t afford to buy. A report from Realtor.com in August said only 28% of homes on the market are priced within reach of the average household. The maximum affordable price for a typical household has dropped to $298,000, down from $325,000 in 2019.

Despite a 15.7% increase in median income since then, buying power has dropped by about $30,000. Danielle Hale, chief economist at Realtor.com, said, “Even as incomes grow, higher interest rates have eroded the real-world purchasing power of the typical American household.”

That affordability crisis is taking a serious toll. A new study from Harvard’s Joint Center for Housing Studies said that the combined pressure from rising prices and high rates has driven homebuying activity to its lowest level since the mid-1990s.

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